When connecting to a new remote server, WinSCP will prompt the user if the key should be added to the cache. If the user selects "No" (to continue connecting without adding the key to the cache), WinSCP will generate the error message "Host key wasn't verified", and will refuse to connect. Only by adding the host key to the cache will WinSCP establish a connection.

More info:
Current (affected) version of WinSCP: 5.0.7
The "No" button was functional in WinSCP 5.0.5
OS: Windows Vista (32 bit)